BancNet adopts IT solution for safer, more efficient banking

MANILA, Philippines - BancNet, the first automated teller machine (ATM) consortium in the Philippines, has deployed an innovative network technology and strategy that allows secure and cost-efficient multi-bank and multi-channel electronic system for its 72 member banks and more than 10 million users.

BancNet’s outsourcing services head Cecill Irigo explained that each bank in the consortium has its own ATM switch and its own network that links it to the consortium. However, it is expensive to build and maintain considering the high capital outlay for servers, software and IT staff needed to maintain it.

Understanding the complex processes and high costs involved in starting and managing an ATM network, BancNet has started providing ATM operations outsourcing to some of its member banks and the service includes ATM switch hosting, card management, and ATM driving.

“What we did was set up an outsourcing switch that is capable of servicing multiple banks. This switch drives the bank’s ATMs, issues their ATM cards and links them to the network and other switches for a fixed annual subscription fee or for a transaction volume-based fees, no capital outlay needed,” Irigo said.

Given BancNet’s extensive client and cardholder base, it needs a reliable security device to safeguard the data and processes within the system. ATM switch hosting and related functions require a high-performing hardware security module (HSM), capable of ensuring the data security, cryptographic processing, and key management during interbank and intrabank ATM transactions.

Shared ATM switch, shared HSM

Irigo said each bank that manages its own ATM network needs an HSM, which is also expensive to deploy. However, this is already provided to member banks that availed themselves of the outsourcing services.

“We built not only a shared ATM switch for our clients but also a shared HSM. To date, four local banks are in production and more are in various stages of implementation,” she said.

The BancNet executive said big banks with many different products and complex infrastructure prefer having their own system. BancNet’s services benefit smaller banks that have standard products such as ATMs, deposit and payroll accounts; for such a model, ATM outsourcing would be much more cost-effective.

However, she said BancNet’s systems can also service big volumes and is not really limited to small operations. “We have clients with more than 35 ATMs,” she said.

For its HSM need, BancNet chose SafeNet’s Luna EFT, an optimized security solution for ATM switch hosting and ATM driving designed for retail payment system processing environments for credit, debit, e-purse and chip cards, as well as Internet payment applications. It offers secure PIN and card processing, message authentication, comprehensive key management and general purpose cryptographic processing.

SafeNet is an information security provider, which counts among its clients more than 25,000 corporate and government customers in 100 countries.

“We chose SafeNet because we need to provide a solution for multi-banking and the solution offered by SafeNet is cost-effective. Thus, we are able to offer our hosting service at a competitive price,” she said.

She added that the Luna EFT provides good value for the investment as it also guarantees a security architecture that competently addresses the needs and demands of its outsourcing business.

Benefits for other Phl enterprises

Irene Ler, SafeNet’s regional sales manager for the ASEAN, said the company is optimistic that the solution deployed by BancNet would benefit more enterprises in the Philippines.

“We actually have two types of HSM — general purpose HSM and payment HSM. What we are offering to banks in the Philippines is mainly the payment HSM. Because HSM is our main business, we offer full protection of data from the moment it is created, shared, transmitted. We have a full suite for the entire data lifecycle,” Ler said.

Aside from financial institutions, SafeNet’s solutions are also used in government and large enterprises to secure confidential information such as social security number and credit card number, and protect these sensitive data from leakage and hacker attack. Its Identity Access Management (IAM) solutions provide strong remote access to the enterprise.

Meanwhile, its network security devices (encryptors) provide government agencies with the means to secure communications between the various sites and the headquarters.

Ler said this is ideal for protecting data in motion, including time-sensitive voice and video streams as it provides the highest throughput, and lowest latency to ensure that communication channels are not compromised.

“All the products that we offer to the market have been certified by an independent lab whereby our products have attained either FIPS or CC certification to help address the needs of customers,” Ler added.

SafeNet sees a trend for Internet and mobile banking, not only in the Philippines but also in the Asia-Pacific and sees opportunities for security solutions in the region.

BancNet, for its part, is also optimistic that the ATM operations outsourcing model would take off in the country as it has been successful in other countries. There are also many other kinds of services that can be included in the ecosystem as the banking or financial industry evolves.

“You can define as many services as possible and be very creative about product offerings within this model, dependent of course on existing regulations but the technology is there,” Irigo said.

Currently, she said there are around 40 commercial banks, 60 thrift banks and 600 rural banks. Most of the big banks and at least 60 percent of the thrift banks already have ATM services but majority of the rural banks that are not yet offering the service are interested because now it is already possible to install ATMs in far-flung places because of the aggressive rollout of data communication facilities nationwide.

“This is also in line with countryside development and financial inclusion,” she said. “We wanted to offer a competitive system that is cost-efficient.”